Execs alter ways to get 'green'

This year's Star Tribune executive compensation survey of Minnesota's 100 highest-paid CEOs found a new kind of "green" in the perks department.

Dick Kelly, chief executive officer of Xcel Energy, is one of seven Xcel employees chosen to drive a 2009 Ford Escape Hybrid, modified to run as a plug-in hybrid, or electric car. Kelly and the others will "provide feedback to the company on the vehicles as part of our testing program," Xcel said.

The benefit to Kelly, who got the car in December, was listed at $898 for 2008.

At a time when controversy over executive pay for bailed-out Wall Street bankers sparked a federal witch hunt, the packages that Minnesota executives took home dropped nearly 40 percent on average from 2007 -- about in line with the stock market's steep decline.

The state's highest-paid CEO -- St. Jude Medical's Daniel Starks, who got $32 million in 2008 -- runs a company that makes pacemakers and heart valves -- not collateralized mortgage obligations and credit default swaps.

And several Minnesota CEOs left money on the table, including Kelly, who recommended to his board that it not pay him a cash bonus on top of his $1.2 million salary, despite the fact that Xcel hit its earnings-per-share threshold. That was a smart move in a year in which Xcel and other shareholders took a bath.

Moderation was appropriate as millions of Americans were laid off, the recession deepened and Washington pumped hundreds of billions of dollars into a faltering financial system amid plummeting housing values and retirement accounts. In March, as the stock market and economy bottomed, President Obama and Congress moved to cap cash compensation at financial institutions that got taxpayer capital.

USB passed the government's stress test this month and was not required to raise additional capital. Regardless, USB just raised $3.5 billion and intends to repay the government's $6.6 billion preferred stock investment this year. Freed of government restrictions and on course for a good year, USB brass should make out a lot better in 2009.

At TCF Financial, CEO Bill Cooper declined to take a salary or bonus when he returned to run the company last July after three-year CEO Lynn Nagorske retired abruptly, citing exhaustion. However, Cooper did get 450,000 shares of restricted stock and 800,000 stock options that vest over three years. His total pay of $4.4 million came from previously issued restricted shares that vested in 2008.

TCF's stock price has risen from about $10 to $14 per share since Cooper's return. He has repaid his so-called TARP allotment to the Treasury because of what he considers the stigma and hassle of the investment.

Not Wall Street

"In Minnesota, we cannot claim that all members of compensation committees are geniuses," said Marty Rosenbaum, a corporate attorney at Maslon, Edelman Borman & Brand. "But we're not Wall Street, with all that short-term compensation, much of it based on smoke-and-mirrors. I'm seeing less cash compensation and more equity compensation that vests over time. I've seen boards asking CEOs to take bonuses in restricted stock that vests over time. So, if you're running something like Lehman Brothers that turned into a smoldering pile of ashes last year, you don't get the whole bonus."

Markets create and destroy wealth, as one Minnesota CEO discovered. Bahram Akradi, the macho-man CEO of Life Time Fitness, was forced to sell more than 2 million shares -- or more than half his holdings -- as the company's stock price fell from $45 per share in early 2008 to $9.50 in November. Akradi sold his Life Time shares to meet margin calls on loans he had taken out to make other investments. The value of the Life Time shares that he'd put up as collateral for his stock-acquisition loans fell below prescribed levels, prompting the margin calls.

In October alone, Akradi sold 1.46 million shares, valued at $27.5 million. His holdings fell from 4.1 million to 1.84 million shares, worth about $29 million.

A year ago, in a sign of faith in the company, Akradi elected to take no salary or bonus in 2008, only restricted stock. After a tough 2008, Akradi and the board reconsidered their compensation strategy. Akradi will get a $750,000 salary plus a bonus of $750,000 in 2009 if the company meets its financial objectives.

Best Buy CEO Brad Anderson, 60, who started as a salesman at the predecessor to Best Buy in 1973, is calling it a career in June. Anderson, who had no fun presiding over layoffs last year, helped build, with Dick Schulze and thousands of dedicated employees, America's dominant consumer electronics retailer.

Anderson, who was paid $1.2 million in salary last year, did not receive a bonus. He knocked down $6.6 million in gains on stock options. As has been his practice for years, he gave tens of thousands of fresh stock options awarded by the board to line employees. That move, which drew national attention, is the kind of thing that gives capitalism a good name.